After 'Inside Job' film, economists group mulls code of ethics

By Timothy R. Homan
Saturday, January 1, 2011

A professional association of U.S. economists is considering establishment of an ethics code, a move that could require members to disclose their ties to financial firms and potential conflicts of interest.

The American Economic Association, the world's largest organization for economists, is expected to consider a proposal next week that would attempt to codify ethics guidelines for economists. The Nashville-based group says that about half of its 18,000 members are academic economists.

"The topic is on the agenda for the executive committee meeting next Thursday," Robert Hall, AEA president and an economics professor at Stanford University, said Friday. "More info may be available after the meeting."

Criticism of the dual role of economists came to the fore after the October release of "Inside Job," a documentary that features economists being interviewed by the film's director about their ties to financial firms.

"We are urging the AEA to adopt a code of ethics that specifically addresses potential conflicts of interest that can arise between economists' roles as economic experts and as paid consultants, principals or agents for private firms," Gerald Epstein, an economics professor at the University of Massachusetts, wrote in a blog post.

Such a code would attempt to bring academic economists in line with some government agencies that have well-defined ethics policies. The Federal Reserve Bank of New York, which has supervisory responsibility for the largest Wall Street banks, advises its officers to stay out of partisan politics and limits contact of former employees with reserve bank staff.

"An employee who ceases to be employed by the bank should not contact the bank concerning a particular matter in which he or she participated while employed at the bank," the New York Fed's Code of Conduct says. "If a current employee is contacted by a former employee concerning such a matter, the current employee must not discuss the matter or provide any information to that individual that is not available to the general public, unless authorized to do so by bank management."

While they are working at the bank, New York Fed staff members can't accept "compensation, a gift, or honorarium from any source" other than the reserve bank for teaching or writing on a subject that relates to their duties. Senior bank examiners can't work for banks they supervised for at least a year after they leave.

"Codes of conduct are impossible to create and impossible to enforce," said David Colander, a professor of economics at Middlebury College who will be part of an ethics panel at the AEA conference. "This has arisen before, it's been discussed, it's been put down summarily."

Colander is a board member at Central Securities, a New York investment firm. He said he does not support the creation of a written ethical code for academic economists.

- Bloomberg News

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